Observations focused on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large. A famous Venezuelan, Juan Pablo Perez Alfonzo, referred to oil as the devil's excrement. For countries, easy wealth appears indeed to be the sure path to failure. Venezuela might be a clear example of that.

Posts Tagged ‘chavez’

I have always believed in the concept of primaries. Political parties in Venezuela have been for too long vehicles for the man in charge to promote himself. If there was something that did not work in the Fourth Republic, it was that part of the democratic process. In fact, it was tried a few times, once, with Luis Beltran Prieto in 1968 winning, the result was not liked because Prieto represented the left wing of Accion Democratica. The result was not respected, the party divided and Gonzalo Barrios became AD’s candidate. The second time in 1993, Oswaldo Alvarez Paz surprisingly beat Eduardo Fernandez, who had set up the primary to be anointed, only to see the people reject him. Alvarez Paz thought he was unbeatable, not understanding Fernandez had lost, he had not really won. Because he did not agree with Carlos Andres Perez’ impeachment, Alvarez Paz left the country to rest, he was out of sight and Caldera came back to Venezuela, grabbed the limelight and won the Presidential election against Paz, one of the two politicians he had groomed to succeed him. The other was Fernandez.

After this, the primary process at any political level was seldom used, leading to political parties where all decisions are made at the top,which stops new and young faces from rising. Remarkably, the 2000 Constitution says that anyone running for political office has to be elected by the rank and file, but like so many things in Venezuela, this has been ignored by the Courts and the politicians.

But primaries are good, because they force candidates to define themselves, allow anyone that can find some funding to run and have your ideas exposed to everyone and candidates have to work hard to meet the people,walk the streets and campaign. In time, some rise, some drop in popularity, forcing decisions on the candidates that define the race. It is a natural selection process which also allows unknowns to be recognized, setting themselves up for a future race.

While I certainly hope the primary process has helped the opposition, there is still a long way to go for it to be considered a success, but I think it has worked rather well, even if the candidates have avoided strong confrontations with each other. Diego Arria had his voice heard, once, in that wants to see Chavez pay for his human rights violations and the second time in placing the focus on the difficulties that an opposition Government is going to have. Maria Corina Machado managed to get some respect with her direct confrontations with Chavez and showing she knows the numbers. Pablo Medina had his pro-union stance heard and fought to the end, gaining a visibility and respect from the opposition that he had never had. Finally, Leopoldo Lopez was allowed to register, but his campaign never gained the traction required. He withdrew and took the risky option of backing one of the other candidates, redefining the race.

I liked Lopez the most. I liked how he went and set up a national network, I like his intuition, his long term thinking, his broader economic vision, his knowledge, his experience and his direct questions. But still, I have more radical economic views than him, in terms of proposing change. And, of course, he is not a candidate any more.

I liked Diego Arria’s decision to run on principles and stay that course. That is how you build political ideas in a country. Remarkably, Arria seems to understand that “other” Venezuela, the rural one that votes for Chavez, better than the other candidates. That came through a couple of times in the debates, but Arria did not define things beyond his main goal, otherwise I could have said I would vote for him. (I actually can’t vote, still registered in Venezuela, where I plan to be next October 7th. for the presidential election)

Then there is Maria Corina Machado. Great race, great words, truly shook up Chavez with her words and managed to shine in the debates. However, she has little managerial experience (Please don’t bring up Sumate), little national structure and to me, she did not try to create much beyond herself.

Which leaves the two Governors, Henrique Capriles and Pablo Perez. In both cases, I disliked the fact that they ran as if they were running for reelection. They talked about satisfying the needs of the population, solving problems and providing services, but neither of them ever gave even much of a hint of the vision they had for the country and the few words devoted to it were not exactly aligned with my thinking. You can promise jobs, but please tell me how you will go about it, Venezuela is complex and requires many types of new jobs.

Pablo Perez was to me a disappointment. He is not only stiff, but he is not that articulate and even his delivery is faulty. In the debate I watched live, I scored him almost at the same level as Pablo Medina, which tells you he did not excite me at all.

Henrique Capriles was also stiff, but was more articulate, more precise. Still concentrated too much on the solving problems for the people without telling me much about his vision for the country. He made statements about the economy that I did not like. But he has experience managing a difficult municipality and a difficult state. The tempo and strategy of his campaign has been exquisite. And while I don’t agree with his less confrontational style with Chavez, it seems to work rather well. I wish it did not, but it certainly does and his political intuition has worked rather well.

And here, I will insert a personal note. I have many friends who are involved in Capriles’ campaign. They are all competent, devoted, hard working and I am sure many of them will occupy positions in a Capriles administration. That alone gives me some comfort in the future of a possible Capriles presidency. BTW, they all tell me Capriles is much, much better in person. Never met him.

But more importantly, at least to me, is that it is time for a new generation to take control and run the country in a more modern way. Capriles and Lopez backing him represent that. The old political parties, the cogollos and those that trapped the country in the Cuarta into an impossible path, should move aside.

And even more critically, we need a strong mandate on Sunday and I will vote to try to give it to Capriles. I think he will win, win big too. Pablo Perez could have beaten Capriles two months ago using his voting structure to get out the vote, but Leopoldo’s own structure tipped the balance strongly on Capriles side. Pablo Perez will not be close, Maria Corina will not do well. Those are my predictions.

Then comes the harder part, the winner has to beat Chavez. And I also believe that Capriles is the better prepared candidate to defeat the Autocrat. The soft style seems to work, even if I don’t understand why. If I was interested in politics, that would not be my style at all. Maybe that is why I am not, nor could be a politician. It is a long campaign between now in February and then in October, but the stage seems to be set.

So, now you know how the Devil would vote, even if you don’t have any idea who the Devil you would vote for. Whatever your choice is, go do it, in the end that may be the most important thing. If the opposition gets 1.5 million plus voters, it will scare the daylights out of Chavez, forcing him to change strategies and by now we all know he is better at setting the debate than reacting to it.

I wanted to write something about the grotesque visit to Venezuela by the the small man from Iran, but felt that I had little to add to the sad spectacle of Chavez calling the Iranian Dictator someone Venezuelans are supposed to have common ground with. But then I read this satire by the always hilarious and poignant Chigüire Bipolar and figured translating that post to English would tell very simply how absurd and incongruous the whole spectacle of the sick-fat man from Caracas hugging and praising the tiny-intolerant man from Teheran. Thanks to the Chigüire for the permission to do so.

Yesterday, President Hugo Chavez gathered his ministers to request from them that they make feel at home his Iranian counterpart Mahmoud Ahmadinejad. The occasion was used by the Minister for the People’s Power for Women, Nancy Perez, to volunteer to be stoned by the distinguished visitor.

“Good afternoon, colleagues, my name is Nancy Perez and I am Minister for Women. Yes, just what you are hearing, I am not pulling your leg. You mean, you did not know there was a Ministry of Women! You never received the Official Gazette? ” said Minister Perez, as a way to break the ice. “Well, seriously, as a representative of Venezuelan women, for me personally it would be an honor to offer myself so that such a distinguished visitor may bury me in the ground up to my neck and stone me to his full pleasure. He can throw acid in my face, he can order me to wear a veil if he likes it, you know what they say:Eyes that can’t see, heart that stops beating because they beat the shit out of it” commented the Minister while she pointed out the parts of her face where it hurts the least to be hit with sharp stones.

“The Iranian president can also whip me if I bend down and he can see my thong, he can have all my skirts destroyed, as well as my low cut blouses and my open sandals. If gentleman Mahmud is Chavez’ distinguished visitor, then Venezuelan women become obedient and submissive, the way President Ahmadinejad likes it” said Perez, moments before calling the CH store in Sambil to ask if by any chance they had any red burkas.

After convincing his 55 colleagues that her ministry was not a joke, Minister Pérez ended her speech: “Our ministry, responsible for ensuring the dignity of women and gender equality, is pleased to receive this champion of the struggle for the rights of the macho, the male, the man and the boy. We declare our joy throughout the country, and therefore encourage women of our country not to leave their homes during the visit of the Iranian President, to remain silent in front of their husbands and boyfriends and indulge them in everything. Yes, everything. Even if it is degrading, disgusting and violates their rights. And please, do not come out with your revealing clothes, lest they awaken the libido of some representative from Iran and we may have to cut your little hands. The occasion demands it”

We now have a decision from the International Chamber of Commerce (ICC) arbitration panel. No matter who won or lost, and I am close to ready to review my conclusion to now call it at least a tie, but I just need more info at this time.

The question is: What does the decision mean for Venezuelan/PDVSA bonds?

Well, I think it is very bullish.

It’s simple:

With the decision, I do not expect another one in 2012. While the ICSID could decide before the Venezuelan Presidential election in the Exxon case, I think it is unlikely, and if it does, it will be so close to that event, as to be essentially immaterial. (There will be a hearing in 1Q12 at ICSID) ICC could rule on ConocoPhillips, which is larger in scope, but given how it ruled in the ExxonMobil case, it would likely be also good news.

Thus, there does not appear to be any possible surprises from arbitration on the way to the election, which was one of the biggest uncertainties on the bonds for 2012. Oil could go down, but it could go up too if Iran gets tricky. Thus, based on internal politics, there will be two, maybe three scenarios:

1) Chavez’s health is fine, he leads the polls, get out of the bonds, it will not be received well by those betting on political change.

2) Chavez’ health is not fine, it deteriorates, bonds soar.

3) The opposition does well in the primaries, leads the polls, bonds soar.

But it is unlikely that there will be surprises in the middle, no decisions to screw up your strategy, to use a fairly technical term. Given 1) you get out by mid year, you may lose a little, not much. Given 2) and 3) collect the coupon and enjoy the ride. No ride, nice coupon. If there is a ride, it will likely your best investment all year. Just like 2011 if you were in the right Venny bonds. (Mostly PDVSA’s)

It’s Venezuelan bond investment at its simplest: Enjoy the carry trade, bet on the upside!

Well, it is early in the year, but Bloomberg last night reported that the International Chamber of Commerce awarded ExxonMobil “only” US$ 750 million in its arbitration case against PDVSA over the nationalization of its assets in February 2007. This ruling is very favorable for Venezuela, as essentially seems to recognize only book value for the expropriated properties. Exxon had been seeking compensation not only for the expropriated property, but also for the loss in cash flow from the operation of the project. ExxonMobil owned 41% of Cerro Negro, which produced on average some 95,000 barrels of heavy crude per day. The multinational company confirmed the news according to the Wall Street Journal.

ExxonMobil had been asking for US$ 7 billion of which about US$ 747 million were tangible assets. According to Bloomberg the award was for US$ 907.6 million, which was reduced to US$ 750 after a counter claim by PDVSA. But in the end the number looks exactly like book value.

ExxonMobil had also been seeking compensation at the World Bank’s ICSID Court, I am not clear how the two overlap or what judgement in one implies for the other.

If arbitration in the oil projects determines that there will be compensation only for the assets of the projects expropriated, then the total liability to ExxonMobil and ConocoPhillips should be of the order of US$ 3.5 billion, rather than the more than US$ 20 billion being sought by the two companies. Estimates put the loss of cash flow from operations around US$ 9 billion, so that a decision including book value and cash flow would have been expected to be (rough numbers) US$ 12.5 billion.

But if the World Bank’s ICISD decides in a similar manner, the Venezuelan Government would have scored a very important victory in its arbitration fights, which would impact the nineteen arbitration cases at the ICISD against Venezuela.

The paid ideologues and advisers of the revolution, like Juan Carlos Monedero above, are truly arrogant and superficial. After a decade of living off the failed revolution, this is all they can say about what has happened in Venezuela. Some random choices with my comments:

-Chavez has learned to think for himself.

Really? When did this miracle take place? Last Year? Does it mean he no longer needs you? Shouldn’t it be the other way around, he should have been able to think by himself before he got to power rather than learn on the job, screwing up everthing?

-A large part of the budget has been devoted to opening schools so that people can think on their own.

Funny, the record of building schools by the Chavez Government is simply dismal compared to that of the failed IVth. Republic, where did the money go?

-The advance in social terms is spectacular.

Really? Spectacular? Where? Did you read Luis Pedro España’s book on poverty in Chavez’ first ten years? And why didn’t you answer the question about the money? To compare Mexico with Venezuela just because they produce oil is simply ignorant and evasive. Why not Nigeria? Did you also advise Mexico?

-The largest indices of crime are in Central America and Mexico, not in Venezuela.

Again, the question was about Venezuela, the country that pays your vacations, not about Mexico or where are the largest rates of crime. When Chavez got to power Venezuela was not even in the radar in the top ten of crime in the world, now we compete with those countries you mention. You say ten years is not enough, sorry it took ten years to get us to where we are in crime.

-The Bolivarian Government has preferred to pay with high inflation than with 5 million people without jobs like in Spain with low inflation.

Truly pathetic, we have both, high inflation and half the work force does not have formal jobs. Have you ever thought about the effect of high inflation on the poor? You clearly have no clue.

-(Chavez’ Government) needs more time to solve the historical structural problems , linked to corruption, inefficiency and the rentist culture and clientelism as a way of life.

You must be kidding me? Chavez’ Government has promoted corruption, inefficiencies and has been the champion of enhancing the rentist culture to say nothing of clientelism.

With advisers like this, no wonder Chavez has taken it upon himself to begin to think on his own.